Today we had a large gap up in the market, let’s look at how we got into the trend on these gap days and how to identify relative strength and weakness.

Stocks to Watch on 10/28:

Another Goose Egg… Here’s Why:

Relative Strength and Relative Weakness

As we move up in the broader market we are looking for the strong stocks to move MORE than the broader market (higher). The weak stocks we look to move up less and when we do have a retracement we expect those weak stocks that we are short of to fall further than the broader market. This is relative strength and relative weakness.

Today, the market was up, and up big. Any strong stocks went with it therefore a stock that pulled back today and may be setting up in what looks like a buy signal on it’s chart is really relatively weak compared to the broader market.

As for shorts…look for stocks in a downtrend to break the low of the high bar for entry.

How to Get into a Long on a Gap UP

LTD Daily Chart

LTD 15-min Chart

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